Agency, Delayed Compensation, and the Structure of Executive Remuneration / Jonathan Eaton, Harvey S. Rosen.

By:

Eaton, Jonathan

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w0777.Publication details: Cambridge, Mass. National Bureau of Economic Research 1981.Description: 1 online resource: illustrations (black and white)Subject(s):

J - Labor and Demographic Economics

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Abstract: In this paper we examine the factors affecting the structure of executives' compensation packages. We focus particularly on the role of various types of delayed compensation as means of "bonding" executives to their firms. The basic problem is to design a compensation package that rewards actions that are in the long-run interest of the stockholders. Firms must take into account (1) their ability to discern unfortunate circumstances from mismanagement; (2) the extent to which a compensation package forces the executive to face risks, beyond his control; and (3) the willingness of a given executive to bear this risk. We use our theory to interpret some executive compensation data from the early 1970's. The results are generally in line with the theoretical predictions.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w0777 (Browse shelf(Opens below))	Not For Loan

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October 1981.

In this paper we examine the factors affecting the structure of executives' compensation packages. We focus particularly on the role of various types of delayed compensation as means of "bonding" executives to their firms. The basic problem is to design a compensation package that rewards actions that are in the long-run interest of the stockholders. Firms must take into account (1) their ability to discern unfortunate circumstances from mismanagement; (2) the extent to which a compensation package forces the executive to face risks, beyond his control; and (3) the willingness of a given executive to bear this risk. We use our theory to interpret some executive compensation data from the early 1970's. The results are generally in line with the theoretical predictions.